CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (the "Agreement") made this 5th day of
March, 1996, by and between RESOURCE LEASING, INC. ("RLI"), a Delaware
corporation and XXXXXXX XXXXXXXXX ("XXXXXXXXX").
WHEREAS, Xxxxxxxxx is experienced in the business of leasing equipment
the cost of which is generally under $50,000 ("Small Ticket Leasing").
WHEREAS, RLI and Xxxxxxxxx desire to conduct all of their future
business in the Small Ticket Leasing field through a newly-formed corporation in
which RLI will own all of the initial equity and of which Xxxxxxxxx initially
will be the chairman, chief executive officer and president and will own stock
options.
NOW, THEREFORE, the parties hereto intending to be legally bound hereby
agree as follows:
1. Formation of Newco. RLI will promptly form a new corporation
("Newco") under the laws of the Commonwealth of Pennsylvania or the State of
Delaware (depending on tax and name availability considerations), having
authorized capital stock consisting solely of 20,000,000 shares of Common Stock,
par value $.01 per share, and having Articles and Bylaws in the form attached
hereto as Exhibit A and Exhibit B, (which may be changed in a way not adverse to
Xxxxxxxxx solely depending on the state of incorporation) respectively. RLI will
contribute to Newco the sum of Two Million Dollars ($2,000,000) in cash
(promptly as such cash may be required by the Company), and the right to use the
name of "Fidelity Leasing." In exchange, RLI will receive nine million
(9,000,000) shares of stock of Newco, which will be all of its initial
outstanding stock. RLI will cause FLC to change its name to F.L. Partnership
Management, Inc. or such other name as shall be selected by its Board of
Directors, and will advise FLC's limited partners, creditors and others that it
is operating under a new name. Newco will change its name to Fidelity Leasing,
Inc. or such other name as shall be selected by its Board of Directors. Promptly
upon the formation of Newco, the parties will execute an Employment Agreement in
the form of Exhibit F, hereto. Promptly upon the formation of Newco, Xxxxxxxxx
will be elected to the Board of Directors of Newco, and RLI shall thereafter
vote in favor of his remaining as a Director until his Employment Agreement
terminates.
2. Stock Options.
(a) Xxxxxxxxx Plan. Newco will promptly adopt a 1996-1 Key
Employee Stock Option Plan (the "Xxxxxxxxx Stock Option Plan") substantially in
the form of Exhibit C hereto. One million (1,000,000) shares will be authorized
by Newco and made subject to the Xxxxxxxxx Stock Option Plan. Upon adoption of
the Xxxxxxxxx Stock Option Plan, Newco will immediately grant to Xxxxxxxxx an
option with respect to one million (1,000,000) shares of Newco stock at $.22 per
share pursuant to a Grant of Incentive Stock Options substantially in the form
of Exhibit D hereto ("the Xxxxxxxxx Option Grant").
(b) Employee Plan. Within thirty (30) days of the date hereof,
Newco will adopt a 1996-2 Key Employee Stock Option Plan in a form similar to
that in Exhibit C hereto except that it may differ materially with respect to
Section 7(g) (the "Employee Stock Option Plan"). Five Hundred Thousand (500,000)
shares will be authorized by Newco and made subject to the Employee Stock Option
Plan. Grants under the Employee Stock Option Plan may contain such provisions as
the Board of Directors of Newco, through the Committee (as defined in the
Employee Stock Option Plan), may prescribe, but it is the intention of Newco
that such grants to employees other than Xxxxxxxxx will not contain the
adjustment provisions set forth in Section 5 of Exhibit B.
(c) Anti-Dilution of Xxxxxxxxx'x Interest. In the case of any
sale or issuance of stock by Newco ("additional issuance") to anyone (including
any issuance pursuant to the exercise of conversion, exchange, option, warrant
or other rights) other than RLI (pursuant to Section 1) or Xxxxxxxxx (pursuant
to Section 5 of the Xxxxxxxxx Stock Option Grant), at any time prior to closing
an initial public offering of Newco common stock, Xxxxxxxxx will be entitled to
additional stock options, which may be issued under the 1996-2 Key Employee
Stock Option Plan (or a different stock option plan adopted for this purpose) in
an amount calculated to allow him to maintain a ten percent (10%) ownership in
the total common stock equity in Newco (excluding from such 10% calculation any
shares or options issued pursuant to the 1996-2 Key Employee Stock Option Plan)
and shall be at an exercise price equal to the price paid or value received for
the stock in the additional issuance; provided, however, that if such price paid
or value received is below the "fair market value" of Newco stock as defined in
the 1996-2 Key Employee Stock Option Plan, Xxxxxxxxx may elect to either (i)
receive the additional options as incentive stock options at "fair market
value," or (ii) receive the additional options as non-qualified options at the
price paid or value received for the stock to which the additional issuance
relates.
3. Xxxxxxxxx'x Right to Sell or Put RLI Shares.
(a) If Newco common stock is registered under the Securities
Exchange Act of 1934 ("publicly held"). At Closing, Newco and Xxxxxxxxx will
enter into a Registration Rights Agreement substantially in the form of Exhibit
E hereto which will provide Xxxxxxxxx certain registration rights, following the
fourth anniversary of this Agreement, to sell fully registered shares then owned
by Xxxxxxxxx.
2
(b) If Newco is not a public company.
(i) At any time during the fifth year after the date
hereof, if Newco is not then publicly held, Xxxxxxxxx shall have the right,
following written notice as described hereinbelow, to require Newco to purchase,
and Newco shall purchase from Xxxxxxxxx, for cash up to 25% of the number of
shares originally subject to (including any adjustments pursuant thereto) the
Xxxxxxxxx Option Grant (the "Xxxxxxxxx Option Shareholdings") at a price equal
to ten times the After Tax Earnings (as defined below) per share of Newco for
the last fiscal year ended prior to the giving of notice by Xxxxxxxxx ("Per
Share Purchase Price"). After Tax Earnings shall mean the before tax earnings of
Newco determined by Newco's independent auditors in accordance with generally
acceptable accounting principles consistently applied adjusted for the taxes
that would be payable if Newco were a corporation that filed a separate tax
return;
(ii) At any time during the sixth year after the date
hereof if Newco is not then
publicly held, Xxxxxxxxx shall have the right to require Newco to purchase, and
Newco shall purchase from Xxxxxxxxx, for cash up to 50% of the Xxxxxxxxx Option
Shareholdings less any amount already sold pursuant to Section 3(b)(i) hereof,
at the Per Share Purchase Price;
(iii) At any time during the seventh year after the date
hereof if Newco is not then publicly held, Xxxxxxxxx shall have the right to
require Newco to purchase, and Newco shall purchase from Xxxxxxxxx, for cash up
to 75% of the Xxxxxxxxx Option Shareholdings less any amount already sold
pursuant to Sections 3(b)(i) and (ii) hereof at the Per Share Purchase Price;
(iv) At any time during the eighth year after the date
hereof if Newco is not then publicly held, Xxxxxxxxx shall have the right to
require Newco to purchase, and Newco shall purchase from Xxxxxxxxx for cash, any
or all of his Newco shares at the Per Share Purchase Price;
Provided, however, that
(A) all such purchase obligations under Sections 3(b)(i)-(iii),
above, shall be subordinated to those obligations of Newco to its outside
creditors outstanding prior to receipt by Newco of notice from Xxxxxxxxx
exercising his rights hereunder;
(B) any of Newco's obligations due in each of the fifth, sixth
and seventh years under Sections 3(b)(i)-(iii), above, in excess of Five Hundred
Thousand Dollars ($500,000), may be deferred to the next following year,
provided that in no event shall the maximum amount payable in the sixth and
seventh year be more than Five Hundred Thousand Dollars ($500,000), and the
balance shall be due in the eighth year along with other amounts due in that
year under (iv), above;
(C) in no event shall any deferred amounts subject to Paragraph
(B), above, be forgiven or otherwise deemed not to be due and owing Xxxxxxxxx as
a result of Newco's becoming publicly held after the date of original incurrence
of such obligation.
3
4. Agreement as to Inter-Company Expenses. RLI agrees that all
transactions between Newco and RLI, or any affiliate of RLI, shall be conducted
on terms reasonably compared to those that would prevail in the case of
commercial transactions between unrelated parties.
5. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, made
and received only when delivered (personally, by courier service such as Federal
Express, when telecopied with acknowledgement of receipt (which may also be by
telecopy)) or when deposited in the United States mail, certified or registered
mail, return receipt requested, postage prepaid and addressed as set forth
below:
If to RLI:
Resource Leasing, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
If to Xxxxxxxxx:
Xxxxxxx Xxxxxxxxx
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: 215-569-8228
RESOURCE LEASING, INC.
By:___________________________
______________________________
Xxxxxxx Xxxxxxxxx
